The Danger of Generative AI for Online Fraud

AI for Online Fraud

By Dr. Gleb Tsipursky

Have you ever wondered how the rapid advancements in artificial intelligence could turn against us, particularly in the realm of online fraud? My recent conversation with Alex Zeltcer, CEO of, sheds light on this alarming issue. 

The Evolving Face of Payment Fraud 

In the insightful words of Alex Zeltcer, a seasoned veteran in fraud prevention, we are facing a significant shift in the landscape of payment fraud. This shift is primarily driven by the rapid adoption of instant, digital transactions, which has transformed how businesses operate and, unfortunately, how fraudsters conduct their illegal activities.  

The trend towards digitalisation has opened up new avenues for fraud that were previously unavailable in the physical world. Industries that deal with digital goods and services, such as online gaming, e-tickets, and digital gift cards, have become hotspots for fraudulent activities. What makes these industries particularly vulnerable is the immediate nature of their transaction and delivery processes. Unlike physical goods, which require shipping and handling, digital products can be delivered instantly over the internet. This immediacy provides a lucrative opportunity for fraudsters, who can quickly turn stolen financial information into cash or equivalent assets with minimal effort and a lower risk of detection. 

Industries that deal with digital goods and services, such as online gaming, e-tickets, and digital gift cards, have become hotspots for fraudulent activities.

Moreover, the resale market for digital goods is vast and largely unregulated, making it easier for criminals to launder their ill-gotten gains. For instance, a fraudster can purchase digital goods using stolen credit card information and then resell them for clean cash in online marketplaces. This process can be automated, allowing fraudsters to conduct these operations on a large scale with relative impunity. 

Another concerning aspect of this trend is the professionalisation of fraud. Traditionally, fraud was often committed by individuals or small groups looking to make a quick profit. However, as Zeltcer points out, we are now witnessing a transformation where these criminals operate more like businesses, employing sophisticated methods and technologies to maximise their illegal profits. They invest in tools and strategies to evade detection, making it increasingly challenging for businesses and fraud prevention experts to stay ahead. 

This evolution of payment fraud underscores the need for businesses to adapt their security and fraud prevention strategies. They must recognise that the digital landscape presents unique challenges that require specialised solutions. The fight against payment fraud in the digital era demands a combination of advanced technology, vigilant monitoring, and continuous adaptation to emerging threats. As these criminal enterprises grow more sophisticated, so must our efforts to protect the integrity of digital transactions and safeguard consumers’ financial information. 

The Rise of Generative AI in Fraud 

The incorporation of generative AI into the toolkit of online fraudsters marks a significant and alarming evolution in the world of cybercrime. As Zeltcer has noted, the past year has seen a dramatic shift from traditional, manual social engineering tactics to sophisticated, machine-driven deceptions. This new era of AI-driven social engineering is fundamentally altering the landscape of online fraud. 

Generative AI, a branch of artificial intelligence focused on creating content, is being leveraged by fraudsters to produce highly convincing and seemingly authentic interactions. Unlike previous methods, where fraud attempts might have been relatively easy to spot due to their generic or formulaic nature, AI-enabled scams are far more nuanced and personalised. These systems can generate text, voice, and even images that are startlingly human-like, making it increasingly challenging for individuals to discern between genuine interactions and fraudulent ones. 

This advanced technology enables fraudsters to scale their operations to levels previously unimaginable. Where once a scam required a human operator to manually craft messages and interact with potential victims, now an AI system can autonomously generate thousands of tailored messages, interact in real time, and adapt its approach based on the responses it receives. This capability not only increases the volume of fraud attempts but also enhances their effectiveness. 

Moreover, generative AI can be trained to mimic specific communication styles, making it possible for fraudsters to impersonate individuals or organisations with a high degree of accuracy. This can lead to highly targeted phishing attacks, where victims receive messages that appear to be from trusted sources, such as their bank, employer, or a familiar contact. These messages can be so well crafted that they evade traditional spam filters and raise no immediate red flags for the recipients. 

The use of generative AI in fraud also represents a troubling shift in the accessibility of sophisticated scamming tools. With the rise of open-source AI models and easily accessible platforms, the barrier to entry for conducting advanced fraud schemes has been significantly lowered. It’s no longer just the domain of tech-savvy criminals; virtually anyone with basic knowledge can deploy these tools for malicious purposes. 

The implications of this trend are far-reaching. Not only does it put individuals at greater risk of falling victim to scams, but it also places a considerable burden on businesses and organisations to strengthen their cybersecurity measures. Traditional methods of fraud detection and prevention, which rely on identifying known patterns and red flags, struggle to keep up with the evolving sophistication of AI-driven scams. This necessitates a new approach to fraud prevention, one that can adapt as quickly as the technologies being used by fraudsters. 

Who’s at Risk? 

In the realm of AI-driven scams, both ends of the age spectrum – the elderly and the Gen Z population – find themselves uniquely vulnerable, albeit in different contexts. The elderly, often perceived as less tech-savvy, are prime targets in more conventional areas of fraud, such as gift cards. Scammers exploit their lack of familiarity with digital nuances, leading them into traps that seem plausible and trustworthy. For instance, they might receive a seemingly legitimate email asking them to purchase gift cards for a supposed emergency, or be duped into sharing their personal information under the guise of a false security alert from their bank.  

Scammers exploit their lack of familiarity with digital nuances, leading them into traps that seem plausible and trustworthy.

On the other end, Gen Z, despite being digital natives, are not immune to these sophisticated scams. Their vulnerability lies in their comfort and trust in digital environments, making them susceptible to more intricate scams, particularly in the realm of cryptocurrency and online investments. They are often targeted through platforms they frequent, like social media, where scams are masked as attractive investment opportunities or endorsements by influencers. These scams exploit their familiarity with digital transactions and their tendency to engage with new trends quickly, often without thorough scrutiny.  

Cognitive Biases and Their Impact on Vulnerability to AI-Driven Fraud 

When discussing the susceptibility of different age groups to AI-driven fraud, it’s crucial to consider the role of cognitive biases. These biases can significantly influence how individuals perceive and respond to potential fraud scenarios. Let’s delve into two specific cognitive biases, the empathy gap and loss aversion, to understand their impact on this topic. 

The empathy gap, a cognitive bias that affects our understanding and prediction of our own and others’ emotions and behaviours, plays a critical role in AI-driven fraud. For the elderly, this gap can manifest in underestimating their susceptibility to scams. They might not fully grasp the emotional manipulation tactics used by scammers, leading to an underestimation of the risk involved. For instance, they might receive a message that plays on their emotions – such as a scammer posing as a grandchild in need – and, due to the empathy gap, fail to recognise the potential deceit because they can’t imagine someone exploiting their empathy for fraudulent purposes. 

For Gen Z, the empathy gap might work differently. They might overestimate their ability to recognise and resist scams, especially in digital environments where they feel at home. This overconfidence could stem from a lack of experience with the more nefarious aspects of online interactions, leading to a gap in understanding the emotional manipulation tactics employed by sophisticated AI-driven fraudsters. 

Loss aversion, the tendency to prefer avoiding losses to acquiring equivalent gains, is another critical cognitive bias in the context of AI-driven fraud. This bias might make individuals, especially the elderly, more susceptible to scams that threaten a potential loss. For example, a phishing email that falsely alerts them to a security breach in their bank account exploits their loss aversion. They may react hastily to prevent a financial loss, thereby falling into the scammer’s trap. 

In contrast, Gen Z’s interaction with loss aversion might be more nuanced. While they may be less concerned about immediate financial losses, given their comfort with digital transactions, they might be more susceptible to scams that play on the fear of missing out (FOMO) on an opportunity, such as a lucrative cryptocurrency investment. This form of loss aversion, where the perceived loss is not having participated in a seemingly beneficial opportunity, can lead them to take hasty and ill-considered actions. 

Protecting Against AI-Driven Fraud 

Combatting this new wave of AI-driven fraud requires a multifaceted approach, as highlighted by Zeltcer. Education and awareness are paramount. Individuals across all age groups need to be informed about the potential risks and the subtle tactics employed by fraudsters using generative AI. For the elderly, this might involve basic digital literacy programmes that teach them to identify suspicious emails or requests. In contrast, for younger generations, the focus should be on instilling a sense of scepticism and due diligence, particularly in dealing with online financial opportunities or requests for personal information.  

Businesses, too, have a crucial role to play. They must invest in comprehensive training programs for their staff, focusing on the latest trends in cyber fraud. Employees should be taught how to recognise the signs of AI-generated communications, which can often bypass traditional security measures. Regular training sessions, simulations of phishing attempts, and updates on new scamming techniques can build a more robust defence against these scams. 

Alongside education, technological innovation in fraud prevention tools is essential. Businesses need to deploy advanced cybersecurity solutions that can keep pace with the evolving sophistication of AI-driven scams. This includes implementing AI and machine learning algorithms in their security systems to detect and respond to unusual patterns or behaviours that could indicate a scam. Moreover, collaboration between companies, cybersecurity experts, and law enforcement can lead to the development of more effective strategies to identify and shut down these fraudulent operations. 

Zeltcer’s company,, takes an innovative approach to fraud prevention, focusing not just on detecting fraud but on increasing approval rates for legitimate transactions. By refining their methods to more accurately identify true fraudsters, they help reduce the collateral damage of false positives in fraud detection. 


As we witness the burgeoning capabilities of generative AI, businesses and individuals must stay alert to the evolving landscape of online fraud. Education, vigilance, and innovative fraud prevention strategies will be our best defence in this ongoing battle against cyber criminals. 

About the Author

Dr. Gleb Tsipursky

Dr. Gleb Tsipursky helps leaders use hybrid work to improve retention and productivity while cutting costs. He serves as the CEO of the boutique future-of-work consultancy Disaster Avoidance Experts. He is the best-selling author of 7 books, including the global best-sellers Never Go With Your Gut: How Pioneering Leaders Make the Best Decisions and Avoid Business Disasters and The Blindspots Between Us: How to Overcome Unconscious Cognitive Bias and Build Better Relationships. His newest book is Leading Hybrid and Remote Teams: A Manual on Benchmarking to Best Practices for Competitive Advantage. His cutting-edge thought leadership was featured in over 650 articles and 550 interviews in Harvard Business Review, Forbes, Inc. Magazine, USA Today, CBS News, Fox News, Time, Business Insider, Fortune, and elsewhere. His writing was translated into Chinese, Korean, German, Russian, Polish, Spanish, French, and other languages. His expertise comes from over 20 years of consulting, coaching, and speaking and training for Fortune 500 companies from Aflac to Xerox, and over 15 years in academia as a behavioural scientist at UNC-Chapel Hill and Ohio State. A proud Ukrainian American, Dr Gleb lives in Columbus, Ohio.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.